FHA Loan - Improve Mortgage Scores

Hello Everyone,

First, I am so grateful for this forum - I have learned so much to prepare for buying my first home!

I'm wondering how I can bump my mortgage scores just a bit. I purchased the Fico Ultimate 3B scores early in December and have since paid off about $2,000 in credit card debt. My Fico 8 scores have jumped some, but I was really hoping my mortgage scores would follow suit. I purchased all 3 reports again yesterday but no changes at all in the mortgage scores.

Out of the $2,000 I’ve paid to decrease the credit card balances, only about $1,000 is being reported so far between the 3 bureaus. New statements for most of my credit cards will be issued mid-January so I anticipate they’ll be reported by the end of the month. I’m still a bit surprised the mortgage scores didn’t budge, although my FICO 8 scores changed.

My goal is to get my middle mortgage score above 660 so I can qualify for a FHA loan through a local lender in MN, with down-payment assistance. I understand 660 is not the minimum to qualify, but my DTI is rather high so my lender informed me that a score of 660 is needed for approval with a DTI of up to 50%. Does that sound accurate?

Anyway – maybe I am being impatient with the mortgage scores to update. Once the remaining $1k is reported (and still paying more each pay day), I’m hoping my 2 top mortgage scores will bump a little bit so my middle score is above the 660 threshold. Is that unrealistic? Is there anything else I can be doing? I’m hoping to apply next month, close by end of April.

FICO 8 Scores as of 1/8/19:

Equifax: 634 (increased 14 points from Dec)

TransUnion: 626 (increased 1 point from Dec)

Experian: 635 (increased 17 points from Dec)

Mortgage Scores (FICO 5, 4 and 2, respectively):

Equifax: 641 (no increase from Dec)

TransUnion: 652 (no increase from Dec)

Experian: 606 (no increase from Dec)

Credit Information:

Income: $68,000/year gross

Employed full-time (W-2 wages). Same employer for 3 years, same line of work for 8 years

Re: FHA Loan - Improve Mortgage Scores

Since no one has come along yet I wanted to at least say welcome to MyFICO.

As the LO said, your DTI is high. IMHO, getting 20 pts by April is not going to be an easy task. So have you thought of contacting IRS, the state, and student loan, and ask for a reduction in monthly payments. You have nothing to lose by asking and everything to gain.

Re: FHA Loan - Improve Mortgage Scores

I’m not a mortgage expert but from my research, FHA lenders will approve mortgages with your middle score; but in your case, the problem is your DTI and that’s why I think your particular LO is requesting a higher mortgage score. What’s DPA?

I found the below on Google which might answer your question about DTI:

Debt-to-Income Limits

Conventional loans are typically 28/36. However, in some circumstances, the back end DTI could go up to 50%.

FHA limits are currently 31/43, though these can be higher under certain circumstances.

Re: FHA Loan - Improve Mortgage Scores

Unless the IRS or State Tax is very soon to be paid in full, the only thing you can control is the credit card utilization.

The taxes and BK are the most hurtful to your scores.

Utilization is still extremely high you do not want any adverse action taken, balance chasing, or worse closing accounts with a balance.

To get a decent bump, is to pay down your CCs to <28.9% of the total credit line, which should be somewhere around 1800 dollars owed total. I know from working on mortgage scores, the less cards that have a balance reported the better. If you have 4, and carry a balance on only 1 at less than 28.9% (rather I'd shoot for 28% to cover any accrued interest), of that one cards total credit line, is better than a balance on all or even 2 or 3. The biggest optimal is to have only 1 card to report a balance and it goes down to less than 8.9% of its' total credit line. Trying for the suggest here, might get it near or at the middle, if doesn't at <28.9, your next threshold of less than 8.9% may just do it.

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Many factors affect your FICO Scores and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating.
FTC's website on credit.

IMPORTANT INFORMATION: All FICO® Score products made available on myFICO.com include a FICO® Score 8, along with additional FICO® Score versions. Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more about other FICO Score versions.

FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Score and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.